How Institutional Change Reconfigures Successful Value Chains : The Case of the Western Pharma Corporations in China

Management researchers have traditionally emphasized two main
factors in the definition of corporate strategies: internal
capabilities and industry competition. However, in less stable,
transition economies it is particularly the changing institutional
environment that influences strategy definition and performance of
multinational corporations (MNCs) as shown by numerous international
business (IB) scholars. Yet, how institutions matter remains a
largely unresolved question. This article examines how institutions
have affected the value chain configuration of Western
pharmaceutical firms in China. Our research framework identifies
four major strategic shifts along the value chain of Western firms
in the pharmaceutical industry: upgrading along the value chain,
outsourcing to contract service providers, expansion of geographical
scope and diversification of product portfolio. The findings allow
concrete managerial implications to be derived for decision makers
of Western pharmaceutical firms operating in China.

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